7 Solid Benefits That Prove Hotel Guest Segmentation is a Gem

Do you know what makes a hotel profitable? It is the way it caters to the guests!

A profitable hotel always focuses on its target or ideal guests.

Let me help you understand it better.

Your hotel is located at  a business park. Do you think people looking for a stay with their friends and party, will choose your property? It is unlikely! But corporate guests could be an ideal type.

When you know the hotel market segments, you can better fulfil the needs and wants of your guests. Also, you can tailor personalised marketing campaigns for them.

It clearly shows the importance of hospitality guest segmentation.

So, in this blog, we are going to dive deep into the hotel guest segmentation aspect and learn how to ace it.

What is Guest Segmentation in the Hotel Industry?

Guest segmentation is the process of defining the market into identifiable segments. In other words, it is a process of grouping guests and narrowing them down.

But before you move ahead and start grouping, it is important that you know what are the market segments in the hotel industry. Having that knowledge will help you better strategize. 

Now, let’s take a look at them as well.

Different types of customer segmentation in the hospitality industry?

1. Geographic segmentation

Geographic segmentation is about grouping guests based on their physical location such as city, state, country, or economic status).

The major benefit of this segmentation is it helps properties in targeting the varying preferences of people from different regions.

For example: You own a luxurious hotel in a posh area in Mumbai, India. Now, while marketing your property, would you target the rural areas? No, right? You would rather target folks living in areas with a good economic status. This is where geographic segmentation helps.

#PointToNote: Geographic segmentation is much easier to perform than the other types.

2. Demographic Segmentation

Hotel demographic segmentation is based on traits like age, gender, ethnicity, income, religion, family makeup, education, etc.

Now, why is the demographic segment important? Let me help you understand with an example again.

Your property is located near a river. You also offer activities like rafting and fishing. What kind of people will be interested in your property? If I am not wrong, then it’s mostly Gen Zs and millennials.

Meaning, with demographic segmentation, you will be able to target these guests more efficiently.

3. Psychographic segmentation

Psychographic segmentation in the hotel industry is performed keeping psychological characteristics in mind. Simply put, guests are clustered based on personality, values, beliefs, lifestyle, attitudes, interests, social class etc.

If you’re one of those accommodation providers that are highly focused on being customer-centric and want to up the personalization game, this is the right segmentation type for you.

Not to mention, it also plays a crucial role in behavioural segmentation. And this brings me to the next point.

4. Behavioural segmentation

Behavioural segmentation in the hotel industry is done considering guest behavioural patterns. It looks into the following aspects:

• Purchase behaviour
• Occasion and timing
• Benefits sought
• Customer loyalty

How does this segmentation help? Here’s an example:

Guest Mr Jeff has visited your property several times in the past. And you have noticed that he only visits when there’s an offer going on. So, you can drop him lines routinely, suggesting personalized offers and making targeted recommendations based on the input.

5. Other approaches to guest segmentation

If you think that the above-mentioned segmentations are a little overwhelming for you and your hotel, you can always take another approach.

You can segment or cluster your guests in the following ways based on

• Travel type (such as business travellers)
• Whether they travel solo or with a group
• Their intent behind travelling (such as leisure travellers)
• Whether they seek packages and specials

Things to Consider While Performing Hotel Guest Segmentation

Now that you have learned about the types of segmentation in the hotel industry, let us understand some essentials that you need to consider.

Ask these questions to yourself:

• What types of guests do you serve?
• Where are most of your guests from?
• Why should they consider your property above any other?
• Who are these folks that are coming to your hotel? Are they baby boomers, Gen Xs Gen Zs, or Millennials?
• What is their booking behaviour?
• Do they travel solo, in a group or with families?

If you can answer these questions, you are much closer to perfecting your hotel customer segmentation game.

Now, here are some things you can do to enhance your segmentation strategies.

• Use surveys
• Create guest profiles
• Have guest personas
• Analyse your guests’ activities on the website
• Use a CRM to interact with your guests
• Look at your online reviews to see what people are saying
• Use sentiment analysis to understand guest intent

These actions will help you better define your guests. The more in-depth understanding you have, the better you can cluster your guests.

Advantages of Hotel Guest Segmentation

There are several advantages of leveraging hotel guest segmentation. And in this internet-driven era, hotel customer segmentation has become a really important aspect.

The idea of dividing a market into homogeneous segments and targeting each with a distinct product and/or message is now at the heart of marketing theory.

Market Segmentation: A Step-By-Step Guide to Profitable New Business by Michael J Croft

Here are some of the top benefits of leveraging market segmentation in the hospitality industry.

1. You can meet your guests’ expectations better

Personalisation plays a major role in the hospitality industry. When you segment your guests, you get a clear picture of what their preferences are.

For example: You have a segment of guests that prefers leisure travelling. So, when they arrive at your hotel, you keep all the amenities and activities they would like during their stay. The better you can personalise your offerings, the more guests will appreciate you.

We also have a dedicated blog on personalisation. You can read it and try out some ideas.

The Secret to Offer Personalised Guest Experience

2. Your market competitiveness increases

When you segment and target your guests the right way, you increase your chances of retaining them.

And with more guest retention comes more guest loyalty. Meaning, your brand becomes well known in the industry.

3. You have better chances of expansion

This is another major advantage of guest segmentation in hotels (especially, with geographical segmentation). When you have data of people from a different location, you can better understand that people from which region are more likely to accept your hotel.

For example: You have witnessed that people from Mumbai have been visiting your hotel for events and parties. And that gives you an idea that you can start a chain in Mumbai as well to cater to their preferences.

4. Marketing and sales efforts become profitable & easier to measure

This absolutely goes without saying! When you have a set of guests segmented based on different characteristics, you know which is the right market. And accordingly, you can target them with content they are more likely to engage with.

Now, when it comes to sales, it helps you pitch better.

You already know Mr Jordan is from Seattle, he’s the CEO of a start-up, he has visited your property in the past for meetings. Then how about pitching him a personalised offer to host events, dinners, stays and other activities for his employees at a good price?

5. You can invest better

When you decide on investing in your property, how do you usually do it? If you do it with just a thought in your head that guests would like certain things, then it might not work.

You have to play it strategically.

Look at your guests’ segments and try to determine what type of guests you serve the most and what they usually seek.

This narrows down your list of things to invest in and enables you to make informative decisions.

6. The business focus improves

Just like your investment strategy, guest segmentation helps you come up with better business decisions.

The more you know your guests, the better you can implement ideas that will improve your hotel business.

Simply put, it’s all about focusing on the aspect that drives revenue.

7. Witness a significant boost in revenue

When it comes to boosting revenue, revenue managers are the ones that take the necessary decisions.

And when they are provided with guests’ segments, they get a clear picture of how they can up their sales; rather than relying on a generic pricing model.

In simple words, boosting revenue is about better aligning your offerings to a specific customer pain point. And that’s exactly what guest segmentation helps with.

Revenue managers can better price their rooms and other offerings based on the value the hotel will bring to its customers.